2007-02-26 09:30:30 CET
2007-02-26 09:30:30 CET
REGULATED INFORMATION
HK Ruokatalo Group Oyj - Financial Statement Release
HK RUOKATALO GROUP'S FINANCIAL BULLETIN FOR 2006
HK Ruokatalo Group Oyj STOCK EXCHANGE RELEASE 26 Feb 2007 at 10.30am
HK RUOKATALO GROUP'S FINANCIAL STATEMENT BULLETIN FOR 2006
* GOOD PERFORMANCE IN INTERNATIONAL OPERATIONS SECOND YEAR RUNNING
* CHALLENGES IN POLAND TOWARDS THE END OF THE YEAR
* LAST PART OF THE YEAR FAIR IN FINLAND; RATIONALISATION OF COST
STRUCTURE PROGRESSES
Group revenue in 2006 came to EUR 934.3 million, an improvement of EUR
51.0 million on the previous year. The book operating profit was EUR
40.4 million (EUR 24.1m in 2005) and the comparable operative EBIT was
EUR 41.8 million (EUR 28.8m). The Board of Directors is to recommend a
dividend of EUR 0.27 per share (EUR 0.27 in 2005).
The Finnish operations of the HK Ruokatalo Group concern are
characterised by intense structural development with the objective of
enhanced cost competitiveness. Though revenue and profitability
developed favourably towards the end of the year, we continued to fall
clearly short of longer-term targets. Growth objectives in revenue and
profitability were reached in Baltic operations. The early part of the
year in Poland was on target. In the fourth quarter, revenue growth
and profitability improvement were halted by tightened competition.
The acquisition of the business of Swedish Meats successfully executed
in the latter half of the year makes HK Ruokatalo Group a
substantially larger player in the industry than before. Swift and
extensive development of operations is necessary if the business and
profitability targets set for the acquisition are to be met.
REVENUE AND FINANCIAL PERFORMANCE
Group revenue in 2006 amounted to EUR 934.3 million, up 5.8% on the
previous year. The highest growth in relative terms was seen in the
Baltics. Revenue growth in the Finnish market was modest. At EUR 40.4
million, consolidated EBIT showed a bump of 67.6% from the previous
year. The swiftest development here as well is attributable to the
Baltics and Poland.
The most significant non-recurring item in Q4 was the capital gain of
EUR 3.4 million arising from the sale of the Turku property. Non-
recurring charges and write-downs primarily relating to restructuring
totalled EUR 2.5 million in Q4. Non-recurring capital gains in the
year totalled EUR 4.8 million while non-recurring charges over the
course of the year came to EUR 6.2 million.
CONSOLIDATED INCOME STATEMENT, Q4 and the entire year
(EUR million)
10-12/06 10-12/05 1-12/06 1-12/05
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Net sales 242.8 233.3 934.3 883.3
EBIT 13.7 2.4 40.4 24.1
- % of net sales 5.7 1.0 4.3 2.7
Share of associates' result -0.4 0.0 0.0 0.7
Financial income and expenses, net -1.8 -0.8 -6.8 -4.5
Profit before tax 11.5 1.6 33.7 20.4
- % of net sales 4.7 0.7 3.6 2.3
Income taxes -2.3 0.2 -5.8 -3.3
Profit for the financial year 9.2 1.8 27.8 17.0
- % of net sales 3.8 0.6 2.9 1.8
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Net profit attributable:
Parent company shareholders 9.1 1.5 27.2 16.0
Minority interests 0.1 0.3 0.6 1.0
Total 9.2 1.8 27.8 17.0
EPS, undiluted, EUR 0.27 0.04 0.79 0.46
EPS, diluted, EUR 0.27 0.04 0.79 0.46
MARKET AREA: FINLAND
Net sales at home in 2006 were EUR 608.0 million, up by EUR 19.2
million (+3.3%) on the corresponding figure a year earlier. The figure
includes company exports from Finland. EBIT rose to EUR 21.8 million
from the previous year's EUR 13.9 million (+56.9%). EBIT came to 3.6%
of net sales (2.4%) while the Group target is 5%.
- Meat business
Sales to the retail trade saw positive development in the latter half
of the year. Whilst deliveries of meat joints increased substantially,
consumer-packed meat fell short of target.
Intense focus on product development allowed us to introduce the
innovative Ehta range of meat products at the end of the year. Our
response to consumer wishes, the Ehta line of easily cooked cuts of
meat represents a major breakthrough in the company's product
philosophy.
Meat exports to Russia remained brisk throughout the year. Increasing
amounts of fresh cut pork were exported alongside the traditional
industrial selections. Other export destinations were Japan, the
United States, the Baltics and Sweden.
The modernisation project at the Forssa slaughterhouse and cutting
room was completed in November with deployment of the final stage at
the slaughterhouse. Deployment of the new investment went largely as
planned. Statutory employer-employee negotiations under the Act on
Cooperation within Undertakings were conducted in Forssa in respect of
both the slaughterhouse and the cutting room. These had to do with the
deployment of the modernised production lines and reduced demand for
labour.
HK Ruokatalo's procurement company LSO Foods Oy and cooperative Järvi-
Suomen Portti Osuuskunta concluded a subcontracting agreement in
September whereby Portti outsourced animal procurement and associated
services to LSO Foods. Higher volumes and the elimination of
organisational overlaps enhance cost efficiency in procurement.
On the whole, the profitability of the meat business was and remains
rather poor although development in the autumn clearly proved that the
action taken thus far is steering performance in the right direction.
- Poultry business
Reduced consumption in certain parts of Europe in early 2006 was
reflected throughout the EU and it manifested as falling consumer
prices, decreased exports and rising inventories.
Consumption of domestic poultry in Finland fell only slightly and
started to rise again during the barbecue season. HK Ruokatalo's sales
have been on target since. Demand increased for highly processed fresh
products in particular. With cost pressure also largely under control,
the company's poultry business achieved its profit targets.
The demand for broiler meat rallied after a slight hiccough in the
early part of the year and total consumption was approximately one
percent higher than in 2005.
The joint venture Länsi-Kalkkuna Oy established by HK Ruokatalo and
Atria on a 50-50 basis to improve the profitability of the turkey
business assumed responsibility for the beginning of the chain:
hatching, slaughtering and cutting. The joint venture will deliver
annual savings of approximately one million euro to HK Ruokatalo,
which is crucial to this loss-making business sector.
- Processed meat and convenience food business
The sales value of HK Ruokatalo's processed meat and convenience foods
grew at the market rate of some two percent. The sales of whole meat
products and frankfurters outpaced overall market growth. The
convenience food market in Finland grew by some six percent. The rise
in company sales of ground meat products and snacks exceeded market
growth. New items launched on the market included the VIA product
range of sauces and soups.
Substantial resources were allocated to product development in keeping
with the revised product philosophy, allowing us to launch the new
Potku product range at the end of the year. Potku is an innovative
range of hot and spicy nibbles geared to consumers with a more
adventurous palate.
The expansion work at the Vantaa plant required under the company's
restructuring programme was launched in autumn 2006.
Despite sales development there remains room for improvement in the
profitability of the processed meat and convenience food business.
Management of rising costs, especially energy costs, poses a challenge
in the processed meat and convenience food business in Finland.
Increasing the value added of products is a key priority.
MARKET AREA: THE BALTICS
Net sales in the Baltics amounted to EUR 130.8 million, up from EUR
113.8 million in 2005 (+15.0%). EBIT improved from the EUR 6.5 million
in 2005 to 12.6 million (+95.3%). EBIT thus came to 9.6% of net sales
(5.7% for 2005).
Sales in the Baltic Group were up by 6 percent in volume and 15
percent in value over the year. In addition to our traditional
mainstays of frankfurters, cooked sausages and hams, higher-end
products such as sliced whole meat products and consumer-packed meats
are also selling increasingly well.
Rakvere solidified its position in Estonia thanks to development
efforts undertaken in the past few years. Development gained support
from the good quality and properly sized volumes of in-house raw
material production. In Latvia, Rigas Miesnieks' new management and
sales organisation have introduced greater efficiency, improved the
product range and modernised the brand. The company is in the black.
In Lithuania, the revamping of the Klaipedos Maistas product range
brought increased sales but the company is still only breaking even.
In the customer base, retail chains grew increasingly stronger and
more solid. Competition between the chains is intense, which is also
reflected in prices.
Growth and change have been particularly rapid in Estonia, where costs
have also gone up the fastest. Rakvere Lihakombinaat and its
subsidiaries have managed to stay abreast of the changes, which is
reflected favourably in market share and production efficiency as well
as revenue and earnings. Continued success also in future is largely
dependent on how well rising costs can be managed.
The fall in the European demand and prices of poultry meat in early
2006 burdened Tallegg, which was at the same time finalising an
extensive clean-up operation on its production chain. In June the
situation had been restored to normal. Stronger demand and prices have
allowed Tallegg to return a profit and it posted a break-even
operative result for the year as expected. Tallegg's performance is
expected to improve in 2007.
MARKET AREA: POLAND
Half of Sokolów's 2006 revenue, i.e. EUR 203.6 million, was
consolidated into HK Ruokatalo Group. The figure in the previous year
was EUR 188.3 million (+8.1%). EBIT came to EUR 6.0 million, up from
EUR 3.7 million in the previous year (+59.5%). EBIT rose to 2.9% of
net sales from the earlier year's 2.0%.
Sokolów's performance in the early part of the year even outpaced
targets. However, price competition continued to intensify in Poland
and the tightened competition resulted in the company's long-running
positive development in revenue and profitability coming to a halt in
the final quarter. The company, for all intents and purposes, refused
to knowingly engage in loss-making sales. Sokolów's competitiveness
needs to improve if the longer-term financial and business targets are
to be achieved on the schedule reported earlier.
Sokolów's Q4 result was further eroded by embezzlement discovered at
the company's Jaroslaw plant and carried out by of a gang of
professional criminals. The credit loss, written down in full in Q4,
has an impact of EUR 0.8 million on the operating profit of the HK
Ruokatalo Group concern in the Polish market. Investigation into the
matter remains pending.
Sokolów acquired Pozmeat, a meat company located outside the city of
Poznan, and its factory completed in 2001. The factory has been empty
since autumn 2004, when Pozmeat went into liquidation. In the longer
term, the acquisition will strenghten Sokolów's operating conditions
in Western Poland and the nearby Berlin economic area. The company
gained additional production capacity and one of Poland's best-known,
century-old meat brands. Production started up in Poznan in early
2007.
EXPANSION INTO SWEDEN
In summer and autumn 2006, the company conducted negotiations on the
acquisition of the business of Sweden's largest meat company Swedish
Meats. The negotiations led to the agreement of 9 November 2006, which
was accepted by the Assembly of Swedish Meats on 13 December 2006. The
amendment to the by-laws of Swedish Meats concerning its purpose and
line of business, a condition to the deal, was passed by its Assembly
on 21 December 2006.
Swedish Meats incorporated its business into the limited company Scan
AB, whose entire capital stock was acquired by HK Ruokatalo Group on
29 January 2007.Scan AB thus became a wholly owned subsidiary of HK
Ruokatalo Group. HK Ruokatalo Group paid part of the purchase price
with a directed issue of 4,843,000 Series A shares. The purchase price
also consisted of a cash consideration in the amount of ca. EUR 76
million (SEK 692 million). In addition, HK Ruokatalo Group assumed
liability for Swedish Meats' debt amounting to a net value of some EUR
171 million or SEK 1.6 billion. The sum of some EUR 7 million (ca. SEK
66 million) will be paid over the next five years in additional
purchase price, conditional however on the repayment to Scan AB of
certain Swedish Meats' membership loans of equivalent value.
Enterprise value according to share prices and currency exchange rates
at the time of execution thus came to approximately EUR 329 million
(SEK 2,988 million).
Goodwill before the acquired balance sheet has been measured at fair
values amounts to some EUR 50 million. The current view is that
purchase price will be allocated to intangible assets under brands.
The company will announce the final allocation of purchase price at a
later date.
The expansion of operations to Sweden and larger company size
strengthen competitiveness and standing in the long run in the Baltic
region and in the food market. We will now be able to provide even
more diverse and efficient service to retail and consumers. This
represents a major step in the future development of HK Ruokatalo
Group. The Group now has 36 production facilities in six countries and
some 10,200 employees as well as leading brands in all its markets.
There are no geographical overlaps. The company does not rule out the
possibility of seeking further growth in Northern Europe also through
mergers and acquisitions.
Scan AB's profitability relative to company size and market standing
is modest. In future, the company will be developed in keeping with
the profitability criteria and economic targets applied by HK
Ruokatalo Group in its business management.
EFFECT OF SCAN ACQUISITION ON GROUP REPORTING AND FINANCIAL INDICATORS
Scan AB and its subsidiaries will be consolidated into Group figures
effective 29 January 2007, taking into account however the fact that
HK Ruokatalo Group assumed liability for operations already on 1
January 2007.
In reporting, Sweden will be added to the Group's previous principal
geographical segments of Finland, the Baltics and Poland. There
remains only the one business segment of food production. The
inclusion of Scan in HK Ruokatalo group will in future markedly alter
consolidated financial indicators.
In addition to information by segment, this release presents pro forma
information on the Group for 2006. More detailed pro forma information
will be provided in the Offering Circular relating to the directed
issue.
MANAGEMENT
On 1 April 2006, former CEO Simo Palokangas took retirement and was
replaced by Kai Seikku, MSc (Econ. & Bus. Admin.). Mr Seikku was
managing director of HK Ruokatalo Oy, which is responsible for the
group's business operations in Finland, before taking up the post of
Group CEO.
RESTRUCTURING OF FINNISH OPERATIONS
The company launched in January 2006 a two-year industrial
restructuring programme in Finland. The aim of the programme is to
centre most of the processed meat production in Vantaa, the value
added processing of fresh meat in Forssa and logistics in Vantaa. The
plan, which is scheduled for 2006-2007, will result in the closing of
operations at the Turku processed meat factory, the Tampere meat
processing plant and the Tampere distribution terminal. The number of
industrial plants will thus fall from eight to six. Together with
certain efficiency measures already implemented, the plan will affect
an estimated 500 jobs by the end of 2007.
As part of the restructuring, HK Ruokatalo Group and LSO Osuuskunta
sold the property in the Kupittaa district of Turku at year-end. HK
Ruokatalo remains a tenant in the office building. The company's lease
on the factory building expires at the end of 2007.
The structural solutions will rationalise business at home and enhance
cost competitiveness. They will deliver annual cost savings in the
region of €15m-€20m, to be realised in part in 2007 and in full in
2008.
ACQUISITION OF MINORITY SHARES IN SOKOLÓW AND RAKVERE
Saturn Nordic Holding (SNH), the joint venture owned by HK Ruokatalo
Group and Danish Crown, increased its holding in Sokolów to 91.75
percent by acquiring in May by public offer some 9.4 million Sokolów
shares. On 23 May 2006, SNH announced it would buy out the remaining
8.4 million shares. When the takeover process ended on 20 June 2006,
permission was sought to de-list Sokolów from the Warsaw Stock
Exchange.
In Estonia, HK Ruokatalo Group announced on 21 June 2006 that it would
buy out the 1.6 million Rakvere shares held by minority shareholders
of Rakvere Lihakombinaat. The takeover process ended on 31 August 2006
and Rakvere Lihakombinaat was de-listed from the Tallinn Stock
Exchange at the end of September.
The buyouts and de-listing of Sokolów and Rakvere facilitate operative
Group management and streamline Group administration.
INVESTING ACTIVITIES
Group gross investments totalled EUR 82.6 million (EUR 59.2m). Of this
sum, EUR 59.8 million was spent at home and EUR 9.7 million in the
Baltics. HK Ruokatalo Group's share of Sokolów investments was EUR
13.1 million.
The figure for Finland includes the buyout of minority interests in
Sokolów and Rakvere in spring and summer 2006, totalling EUR 17.7
million.
The modernisation of the slaughterhouse and cutting room in Forssa was
completed for deployment in November 2006. The transfers and
modifications necessitated by the Finnish restructuring efforts were
underway since spring.
Major investments in the Baltics concerned Rakvere subsidiary Ekseko's
new pig farm and the new hennery commissioned by Tallegg.
In Poland, major investments were related to the acquisition of
Pozmeat and preparations for the start-up of operations.
FINANCING ACTIVITIES
Group interest-bearing liabilities at 31 December 2006 were EUR 196.7
million, compared to EUR 176.1 million a year earlier. Interest-
bearing liabilities averaged at over EUR 200 million throughout the
year. The increase is largely attributable to brisk investing
activities. Approximately half of the increase in financing expenses
is explained by the rise in loans and half by the increase in interest
rates. The equity ratio was 43.7 percent (44.7%).
SHARE CAPITAL
HK Ruokatalo Group Oyj's registered and fully paid share capital at
the balance sheet date was EUR 58,587,428.10. There was no increase in
share capital during the year.
At the balance sheet date, the share capital was divided into
29,063,193 A Shares and 5,400,000 K Shares. Each share has a nominal
value of EUR 1.70 and gives equal entitlement to a dividend. Under the
company's Articles of Association, each A Share conveys one vote and
each K Share 20 votes. All the K Shares are owned by LSO Osuuskunta.
HK Ruokatalo Group's shares joined the book-entry securities system on
31 October 1997.
At the balance sheet date, the company had 8,214 shareholders.
STOCK EXCHANGE LISTINGS
HK Ruokatalo Group's A Share has been quoted on the Helsinki Exchanges
since 6 February 1997. During the year under review, 21,388,820 HK
Ruokatalo A Shares were traded on the Helsinki Exchanges for an
estimated total of EUR 236,148,251. The highest price quoted was EUR
15.19 and the lowest EUR 8.35. The middle price was EUR 11.02 and the
year-end closing price was EUR 14.50. The share price rose by 47.1
percent on the year.
HK Ruokatalo's market capitalisation (A and K Shares) at the balance
sheet date increased from EUR 339.8 million in the previous year to
EUR 499.7 million.
HK Ruokatalo Group has in place a market making agreement with FIM
Pankkiiriliike Oy which meets the requirements of the Helsinki
Exchanges' Liquidity Providing (LP) operation.
NOTICES OF CHANGES IN OWNERSHIP
On 16 June 2006, Osuuspankkikeskus (Osk) announced that its stake in
HK Ruokatalo Group Oyj had decreased to 4.997% of the shares and
1.257% of the votes. The stake includes the holding of
Osuuspankkikeskus and its subsidiaries, as well as the mutual funds
administrated by OP and Pohjola Treasury companies.
On 13 July 2006, Julius Baer Investment Management LLC (New York, USA)
announced that its shareholding in HK Ruokatalo Group had on 17
January 2006 risen to 5.13% of the share capital and 1.29% of the
votes.
Swedish Meats ek. för. announced on 13 November 2006 that it had
concluded an agreement which when executed would increase its holding
in HK Ruokatalo Group to 12.32% of the shares and 3.41% of the votes.
As part of the agreement, HK Ruokatalo will direct an issue of
4,843,000 A shares to Swedish Meats.
Julius Baer International Equity Fund announced on 8 December 2006
that its shareholding in HK Ruokatalo Group had risen to 5.43% of the
share capital and 1.37% of the votes. Taking into account the stake
held by its parent company Julius Baer Investment Management, the
Julius Baer Group's holding in HK Ruokatalo Group increased to a total
of 13.62% of the share capital and 3.42% of the votes.
Swedish Meats ek. för. (Sweden) announced on 15 December 2006 a
conditional agreement which when executed would increase its holding
in HK Ruokatalo Group. LSO Osuuskunta and Swedish Meats had agreed on
a share swap that would result in the share of votes in HK Ruokatalo
Group held by Swedish Meats rising from the 3.41% notified on 13
November 2006 to 12.32 percent. The share swap is subject to the
consent of the Board of Directors of HK Ruokatalo Group.
BOARD OF DIRECTORS' AUTHORISATIONS TO INCREASE THE SHARE CAPITAL
(1) The Board of Directors holds an authorisation granted by the
Annual General Meeting of Shareholders on 21 April 2006 to increase
the share capital through the issue of no more than 2,000,000 new A
shares, thus raising the share capital by a maximum of EUR 3,400,000.
The authorisation allows the Board of Directors to disapply the pre-
emption rights of existing shareholders and to decide the issue price
and other terms and conditions of subscription.
(2) On 21 April 2006, the Annual General Meeting authorised the Board
to decide whether to acquire and transfer treasury shares. The company
may, in public trading or in a public bid, acquire a maximum of
3,446,319 A shares.
The authorisations are valid until the next Annual General Meeting of
Shareholders, however no longer than until 21 April 2007. The Board
has exercised neither authorisation (1) nor (2).
(3) On 22 December 2006, an Extraordinary Meeting of Shareholders
authorised the Board to decide on the directed issue pertaining to the
acquisition of Swedish Meats and its terms and conditions. A maximum
of 4,843,000 A shares may be issued. The authorisation is valid until
30 June 2007. The Board decided on 29 January 2007 to exercise the
authorisation.
EMPLOYEES
The HK Ruokatalo Group concern employed an average of 4,418 (4,541)
people in Finland and the Baltics during the year. At 31 December
2006, the Group had a total of 4,165 employees in Finland and the
Baltics, compared to the figure of 4,309 in the previous year. The
Sokolów Group employed an additional 4,968 (5,028) people.
The average number of parent company employees was 14 (11 in 2005).
Analysis of employees by country at the end of the financial year:
Finland 2,328 56.0%
Estonia 1,580 37.9%
Latvia 201 4.3%
Lithuania 51 1.2%
Russia 5 0.1%
INCENTIVE SCHEME FOR KEY PERSONNEL
The Board of Directors has decided to introduce a share incentive
scheme for the years 2006-2008. The purpose of the scheme is to foster
the commitment of key personnel to the achievement of the company's
strategic and financial targets while also making them long-term
shareholders in the company. The scheme concerns some ten key
employees who have the opportunity of receiving HK Ruokatalo Group's A
Shares as a reward for achievement of set targets.
The incentive scheme consists of three earning periods of one calendar
year each: the years 2006, 2007 and 2008. The Board decides on the key
personnel included in the scheme for each earning period and on the
maximum bonus payable to them.
Any bonuses under the scheme are tied to Group net sales and return on
capital employed. The bonuses will be paid after the end of each
earning period partly in shares and partly in cash. The cash element
is used to cover any taxes and fiscal charges arising from the shares.
The persons shall hold on to the shares earned for at least three
years from the end of earning period.
The element to be paid as shares for the first earning period shall
not exceed a total of 96,000 A Shares in HK Ruokatalo Group. The
maximum numbers of shares and criteria for other earning periods shall
be decided by the Board at a later date. The Board will take a
separate decision on the acquisition of treasury shares for the
incentive scheme.
RISKS, UNCERTAINTY FACTORS AND THE ENVIRONMENT
HK Ruokatalo Group and its business units in Finland, Sweden, the
Baltics and Poland constantly assess the risks relating to its
business at both the operative and owner administration levels.
Assessment also takes into account whether or not the risk management
means are appropriate in terms of quality and scope.
The monitoring and analysis of any factors of uncertainty is part of
the normal operations of HK Ruokatalo Group's management system. In
the meat industry, factors of uncertainty may arise from fluctuations
in the price and availability of raw meat material and, in the long
term, changes in the EU's common agricultural policy (CAP) and
decisions by the WTO in world trade issues. Changes in consumer
preferences may also constitute a factor of uncertainty if not
identified in time. Changes in retail structure and
internationalisation are set to continue and will amplify competition
in the meat industry in our main markets.
As concerns the environment, the Group operates on the principle of
causing minimum environmental impact during production. This principle
is put into practice in Finland, Sweden, the Baltics and Poland,
taking into account existing regulations and certification processes
at the local and EU level. Operative management in each principal
market area is responsible for ensuring the appropriate organisation
of environmental management.
EVENTS TAKING PLACE AFTER 31 DECEMBER 2006
The transaction between HK Ruokatalo Group and Swedish Meats was
completed on 29 January 2007 when the entire capital stock of Scan AB
was transferred to HK Ruokatalo Group and Scan AB officially launched
operations as the Swedish subsidiary of HK Ruokatalo Group. The Board
of HK Ruokatalo Group simultaneously exercised the authorisation
granted to it by the Extraordinary Meeting of Shareholders on 22
December 2006 and effected the directed issue of 4,843,000 Series A
shares to Swedish Meats. The subscription period was 29 January 2007
and the issue price was EUR 15.55 per share. The company's share
capital was increased by EUR 8.233.100. The increase was entered in
the Trade Register on 5 February 2007.The new shares are first
entitled to full dividend for the 2007 financial year.
Magnus Lagergren was appointed managing director of Scan AB as of 29
January 2007. He previously served as the managing director of Swedish
Meats. Executive vice president of the company's meat business Esa
Mäki was appointed managing director of HK Ruokatalo Oy effective 1
March 2007.
As of 1 March 2007, the Group Management Team of parent company HK
Ruokatalo Group consists of CEO Kai Seikku, CFO Matti Perkonoja, CMO
Antti Lauslahti, managing director of HK Ruokatalo Oy Esa Mäki,
managing director of Scan AB Magnus Lagergren and Olli Antniemi,
executive vice president, the Baltics. Senior vice president Risto
Siivonen serves as Secretary to the Management Team. In addition to
the Group Management Team, each subsidiary has an operative management
team.
On 8 February 2007 Danish Crown announced that its holding in HK
Ruokatalo Group was diluted to 8.89 percent of shares and 2.46 percent
of votes as a consequence of the increase of HK Ruokatalo Group's
share capital.
Swedish Meats ek. för. announced on 15 February 2007 that the
conditional agreement notified by it on 13 November 2006 had been
executed. Swedish Meats' holding in HK Ruokatalo Group was thus
confirmed at 12.32 percent of shares and 3.41 percent of votes.
THE FUTURE
The Group's operating profit is expected to improve in Finland, Sweden
and Poland during 2007, excluding in Poland, however, costs relating
to the start-up of Pozmeat.
In Finland, the savings reaped from restructuring as well as
optimisation of the product range will gradually be reflected in
earnings.
Restructuring to improve the poor profitability of operations,
possibly resulting in non-recurring charges, may lie ahead in Sweden.
Earnings improvements in Poland are hindered by non-recurring items
relating to the start-up of Pozmeat operations. These will be reported
separately for each quarter. Additionally, competition in Poland
remains challenging as reported above, which adds to uncertainty
especially in the early part of the year.
In the Baltics, where costs are spiralling, we aim to maintain
earnings at the good level enjoyed in 2006.
DIVIDEND RECOMMENDATION
The parent company's distributable equity is EUR 11.4 million. The
Board of Directors is to recommend that the company pays a 2006
dividend of EUR 0.27 per share, in other words a total of EUR 9.3
million.
ANNUAL GENERAL MEETING
HK Ruokatalo Group Oyj's Annual General Meeting is to take place in
meeting room 208 of the Congress Wing at Helsinki Fair Centre,
Messuaukio 1, 00520 Helsinki, on Friday, 20 April 2007. To be eligible
to attend the Annual General Meeting, shareholders should be
registered by 10 April 2007 in the share register maintained by the
Finnish Central Securities Depository Ltd (APK). Notice of the Annual
General Meeting and agenda will be published later.
CONSOLIDATED INCOME STATEMENT 1 JANUARY - 31 DECEMBER
(EUR million)
2006 2005
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Net sales 934.3 883.3
Other operating income 8.5 4.1
Materials and services -617.6 -587.9
Employee benefits expenses -150.1 -145.3
Depreciation and value adjustments -30.5 -28.7
Other operating expenses -103.3 -102.0
EBIT 40.4 24.1
Financial income and expenses, net -6.8 -4.5
Share of associates' result 0.0 0.7
Profit before taxes 33.6 20.4
Income taxes -5.8 -3.3
Profit for the financial year 27.8 17.0
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Net profit attributable:
Parent company shareholders 27.2 16.0
Minority interests 0.6 1.0
Total 27.8 17.0
EPS, undiluted, EUR 0.79 0.46
EPS, diluted, EUR 0.79 0.46
CONSOLIDATED BALANCE SHEET (EUR million)
31.12.2006 31.12.2005
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ASSETS
Non-current assets
Intangible assets 4.0 4.1
Goodwill 53.9 46.8
Property, plant and equipment 294.5 266.3
Shares in associates 5.5 5.1
Available-for-sale financial assets 0.3 0.4
Long-term receivables 4.0 3.7
Deferred tax assets 2.2 2.2
Total non-current assets 364.4 328.6
Current assets
Inventories 58.4 65.4
Trade and other receivables 114.7 107.5
Cash and bank 12.1 12.8
Total current assets 185.1 185.7
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TOTAL ASSETS 549.5 514.4
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EQUITY AND LIABILITIES
Equity attributable to
parent company shareholders 236.4 219.1
Minority interest 0.6 10.8
Total shareholders' equity 237.1 229.9
Non-current liabilities
Deferred tax liability 12.2 12.2
Long-term liabilities, interest-bearing 87.1 84.2
Pension obligations 4.8 4.5
Non-current provisions - -
Total non-current liabilities 104.1 100.9
Current liabilities
Current liabilities, interest-bearing 109.6 91.9
Trade payables and other
current liabilities 97.7 91.2
Current provisions 1.0 0.4
Total current liabilities 208.3 183.5
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TOTAL EQUITY AND LIABILITIES 549.5 514.4
CASH FLOW STATEMENT (EUR million)
2006 2005
OPERATING ACTIVITIES
Cash flow from operating activities 70.4 52.5
Change in net working capital 6.3 -15.9
Financing items and taxes -12.3 -7.8
Cash flow from operating activities 64.4 28.8
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INVESTING ACTIVITIES
Cash flow from investing activities -76.2 -59.2
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FINANCING ACTIVITIES
Change in loans 20.4 30.9
Dividends paid -9.3 -10.0
Share issue - -
Cash flow from financing activities 11.1 20.9
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Change in liquid assets -0.7 -9.5
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COMPARISON OF SEGMENT INFORMATION
Revenue and profit in the group's principal market areas for the last
quarter and during the entire financial year (EUR million):
10-12/2006 10-12/2005 1-12/2006 1-12/2005
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Net sales
-Finland 162.9 153.0 608.0 588.8
-The Baltics 33.2 29.0 130.8 113.8
-Poland 49.5 52.4 203.6 188.3
-Between segments -2.8 -1.1 -8.2 -7.5
-Total 242.8 233.3 934.3 883.3
EBIT
-Finland 9.5 0.1 21.8 13.9
-The Baltics 3.2 1.4 12.6 6.5
-Poland 1.0 0.9 6.0 3.7
-Between segments 0.0 0.0 0.0 0.0
-Total 13.7 2.4 40.4 24.1
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PRO FORMA SEGMENT INFORMATION
EUR million
1-12/2006
-----------------------------
Net sales
-Sweden 1,124.8
-Finland 608.0
-The Baltics 130.8
-Poland 203.6
-Between segments -10.1
-Total 2,057.1
EBIT
-Sweden 11.4
-Finland 21.8
-The Baltics 12.6
-Poland 6.0
-Between segments 0.0
-Total 51.8
-----------------------------
- Pro forma balance sheet total EUR 1,009.1 million
- Equity ratio 31.0%
Pro forma information bases on 2006 consolidated financial statements
of HK Ruokatalo Group, 2006 pro forma information on Scan Group taking
into account the transaction on 29 January 2007 where HK Ruokatalo Oyj
aquired the entire share capital of Scan AB.
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
(EUR million)
Share Share Hedging Other Transl. Retained
Tot.
capital premium reserve res. diff. earnings
reserve
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
1.1.2006 58.6 72.9 1.0 8.6 4.8 73.2 219.1
Cash flow
hedging
Amount transferred
to shareholders' equity
during the period 0.0 0.0
Reclassifications
between items 0.0 0.0 0.0 0.0 0.6 0.0 0.6
Other changes 0.0 0.0 -0.9 0.3 0.0 -0.6 -1.2
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Net profit/loss recognised
directly in share-
holders' equity 0.0 0.0 -0.9 0.3 0.6 -0.6 -0.6
Profit for the period 27.2 27.2
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Total profits
and losses 0.0 0.0 -0.9 0.3 0.6 26.6 26.6
Dividend distribution -9.3 -9.3
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
TOT 31 DEC 06 58.6 72.9 0.1 8.9 5.4 90.5 236.4
----------------------------------------------------------------------
Share Share Hedging Other Transl. Retained
Tot.
capital premium reserve res. diff. earnings
reserve
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
1 Jan 2005 58.6 72.9 0.0 8.4 2.6 67.5 210.0
Cash flow
hedging
Amount transferred
to shareholders' equity
during the period 1.0 1.0
Reclassifications
between items 0.0 0.0 0.0 0.0 2.2 0.0 2.2
Other changes 0.0 0.0 0.0 0.2 0.0 -0.3 -0.1
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Net profit/loss recognised
directly in share-
holders' equity 0.0 0.0 1.0 0.2 2.2 -0.3 3.1
Profit for the period 16.0 16.0
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Total profits
and losses 0.0 0.0 1.0 0.2 2.2 15.7 19.1
Dividend distribution -10.0 -10.0
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
TOT 31 DEC 05 58.6 72.9 1.0 8.6 4.8 73.2 219.1
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COMMITMENTS AND CONTINGENT LIABILITIES (EUR million)
31.12.2006 31.12.2005
Debts secured by
pledges or mortgages
Pension plan loans 0.0 0.0
Loans from financial institutions 50.4 70.0
Real estate mortgages 47.9 51.5
Pledged securities 13.5 12.0
Floating charges 10.6 11.9
Securities for debts
of associates 3.6 4.0
Security for debts of others 8.3 6.2
Other contingencies
Leasing commitments 1.1 0.4
Other liabilities 0.0 0.0
Derivative instrument liabilities
Nominal values of derivative instruments
Foreign exchange derivatives
-forward exchange contracts 4.2 3.5
Commodity derivatives
-electricity derivatives 6.5 4.3
Fair values of derivative instruments
-forward foreign-exchange contracts 0.0 0.0
-forward electricity contracts 0.2 1.0
FINANCIAL INDICATORS
2006 2005
Net sales, EUR million 934.3 883.3
EBIT, EUR million 40.4 24.1
- % of net sales 4.3 2.7
Profit before taxes, EUR million 33.6 20.4
- % of net sales 3.6 2.3
Return on equity (ROE), % 11.9 7.7
Return on investment (ROI), % 10.1 7.4
Equity ratio, % 43.7 44.7
Gross investments, EUR million 82.6 59.2
- % of net sales 8.8 6.7
R&D expenditure, EUR million 8.5 8.0
- % of net sales 0.9 0.9
Employees, average 4,418 4,541
PER SHARE DATA
2006 2005
Earnings per share (EPS), diluted, EUR 1) 0.79 0.46
Equity per share, EUR 2) 6.86 6.36
Dividend per share, EUR 0.27 3) 0.27
Dividend payout ratio, diluted, % 34.2 3) 58.2
Effective dividend yield, % 1.9 3) 2.7
Price/earnings ratio (P/E)
- undiluted 18.4 21.2
- diluted 18.4 21.2
Lowest trading price, EUR 8.35 7.23
Highest trading price, EUR 15.19 10.05
Middle price, EUR 11.02 9.17
Closing price on year, EUR 14.50 9.86
Market capitalisation, EUR million 499.7 339.8
Shares traded, 1,000 21,389 11,395.0
- % of average number 73.6 39.2
Adjusted number of shares
- average during the financial year 34,463,193 34,463,193
- at end of financial year 34,463,193 34,463,193
- fully diluted 34,463,193 34,463,193
1) Based on number of shares at year-end
2) Excluding minority's share of equity
3) Based on Board of Directors' dividend recommendation.
This financial statement bulletin and comparison information has been
prepared in compliance with IFRS recognition and measurement
principles. The figures in this bulletin are unaudited.
Vantaa, 26 February 2007
HK Ruokatalo Group Oyj
Board of Directors
Kai Seikku
CEO
DISTRIBUTION:
Helsinki Exchanges
Main media
www.hkruokatalo.fi
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